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Mississauga Mayor Hazel McCallion in 2010. (Mike Cassese/Reuters)

The inquiry probing the possible violation of conflict of interest rules by longtime Mississauga, Ont., Mayor Hazel McCallion has found that she had a "real and apparent conflict of interest."

The City of Mississauga judicial inquiry report by Justice Douglas Cunningham ruled that McCallion was inappropriately involved in a failed $14.4-million land deal between the city and World Class Developments, a development company partly owned by her son, Peter McCallion.

The report states that people "fortunate enough to enjoy friendships" with the mayor have reaped benefits from those ties, and that the popular mayor's actions raise "significant concerns."

Cunningham, who wrote the report, said he made his findings with a "measure of regret" because of McCallion's "unique history of public service" to Mississauga. In fact, he said he was hopeful his recommendations would "enjoy her personal support."

The report found that reforms are necessary at the provincial level and recommends changes to Mississauga's Code of Conduct, the Conflict of Interest Act and the Municipal Act, as well as an enhanced role for an integrity commissioner.

"It is clear that Mississauga, and indeed all Ontario municipalities, requires a better ethical infrastructure," concluded the report. Economic transparency will serve to "protect the public interest by removing possibilities for members of council to discharge their public offices in their pursuits of private interests."

Inquiry focused on mayor and her son

The mayor repeatedly denied having conflicts of interest in advocating for the World Class Developments deal — which involved a convention centre, a luxury hotel and condo developments on a parcel of land near the Square One shopping centre.

She said she was unaware that her son was an 80 per cent shareholder in the company, which collected $4 million in an out-of-court settlement with the city when the deal fell through.

Cunningham rejected her claim of ignorance, saying the mayor must have known her son stood to gain much more than a real estate commission. If the deal had gone through, he argued, Peter McCallion might have made more money than he otherwise would in a lifetime.

The report also found that:

The mayor had an obligation to make reasonable inquiries in order to fully understand the nature of her son's interest in the WCD, prior to advocating on behalf of the company.

The mayor had a responsibility to keep city council informed, and she should have been more transparent about her interests.

The mayor should have refused involvement with the project once aware of her conflict of interest. Instead, she actively pushed WCD's goals at many stages of the transaction even though she knew her son had a monetary stake in the project.

The mayor cannot excuse herself by saying that her actions were beneficial to the city.

Cunningham called for greater transparency and more safeguards against preferential treatment that may not be in the public interest.

The inquiry began in earnest in 2009, and heard testimony from 35 witnesses. The formal investigation is now complete, and Mississauga's city council will have to decide how to take up the report's recommendations.

McCallion will not step down

Cunningham noted that there is no mechanism to remove McCallion from office, and did not suggest that the mayor should step down. But he did say her actions "raise significant concerns" and motivated his serious and substantial recommendations for the city's ethical infrastructure.

When asked by reporters if she would step down on her own volition, McCallion said she did not see a reason to do so.

"No, by any means, because I complied with the Conflict of Interest Act," she said, referring to the "vague" legislation that may be updated using Cunningham's recommendations.

McCallion maintains that she acted within the "only legislation on the books at the time" and that the citizens of Mississauga have confidence in her after decades of leadership.

'Everyone makes mistakes'

At a busy bus stop in Mississauga, the vast majority of residents speaking with CBC News were clear their love for McCallion had not waned.

"She's a person," Cecil Hailey said. "Everyone makes mistakes. I'm sure the next person will do the same thing and make the next mistake."

Tyleen Ollerich was one of the only people who said she wasn't sure she could support McCallion any more.

"Family is important, but you're taking care of a bigger family now. And you need to understand that everyone matters and not just that one person."

McCallion said she is willing to apologize to those who are "of the opinion" that she did wrong.

A spokesperson for the city was diplomatic in her response.

"The city will now take the necessary time to review the report and consider its recommendations. Staff will then be in a position to take appropriate action," said Janice Baker, Mississauga's chief administrative officer and city manager.

Baker — who will lead the review of the inquiry report — did not defend, reprimand or even mention the mayor in her official statement.